A maker of wireless speakers and home audio systems that let you play music in every room from one app, with products like the Arc Ultra soundbar, the portable Era series, and headphones. Sonos was founded in 2002 in Santa Barbara, California, by four former software engineers who built their own wireless network, called SonosNet, above a restaurant. The name comes from the Latin word for "sound" and is a palindrome, reading the same backward and forward.
Sonos Q3 gross margin hit 50.4% on $23.2M in tariff refunds, swinging to a $29.9M profit.
A one-time tariff refund reshaped the quarter. rose 8.8% to $375.3 million and reached 50.4%, turning a $3.4 million net loss a year ago into a $29.9 million profit, almost entirely because of a $23.2 million IEEPA tariff refund. The underlying business returned to growth on new speakers, but the profit was not its own.
Key takeaways
rose 7.0 points to 50.4%, driven by a $23.2 million refund of ; without it, the underlying margin improvement came from price changes and lower write-downs.
rose 8.8% to $375.3 million, breaking a two-quarter streak of declines, as newly launched Era 100 SL and Play speakers drove growth in the core Sonos speakers category.
Sonos system products declined 5.4%, partially offsetting the speaker gains and shifting the product mix.
Section summaries
Management's Discussion and Analysis
Q3 FY2026 revenue rose 8.8% to $375M and net income swung to $29.9M, aided by tariff refunds and new product launches.
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Total grew 8.8% to $375.3M, driven by new Era 100 SL and Play speakers, while Sonos system products declined 5.4%.
swung to $29.9 million from a $3.4 million loss a year ago, aided by the tariff refund and a gain on the sale of excess components.
Operating expenses excluding restructuring rose 2.2% to $153.5 million, as higher R&D investment and legal fees were largely offset by lower sales and marketing spend.
The company repurchased $95.3 million of common stock during the first nine months of the fiscal year, ending the quarter with $261 million in cash and marketable securities.
What changed
The second product delayed by the 2024 app crisis, flagged repeatedly in prior quarters, appears to have launched: the Era 100 SL and Play speakers drove the 8.8% increase, and management did not mention any remaining delayed products.
The 15.8% decline in Sonos speakers from Q3 FY2025 reversed, with the category returning to growth on the new launches, settling the question of whether the core business could recover.
, which had been pressured by write-downs and flagged as a risk in every recent filing, rebounded sharply — but the 50.4% figure is inflated by a one-time tariff refund; the underlying improvement is smaller.
The $200 million authorization is being used: $95.3 million was spent in the first nine months, and the cash balance remains at $261 million, addressing the prior question of whether buybacks would resume.
R&D spending, which had been declining by double digits after the restructuring, rose in Q3 as a percentage of , suggesting the company is reinvesting in its product pipeline after the cost-cutting cycle.
What to watch
Whether normalizes below 45% in Q4 FY2026 once the $23.2 million IEEPA tariff refund is lapped, revealing the true run-rate of the underlying improvement.
Whether the Era 100 SL and Play speakers sustain their launch momentum into the seasonally important Q4 holiday quarter and return Sonos speakers to growth for a second consecutive quarter.
The pace of share repurchases against the remaining authorization and whether the $261 million cash balance is sufficient to sustain both buybacks and operations if the underlying business returns to a net loss.
Whether the 2.2% increase in operating expenses, driven by higher R&D and legal fees, signals the end of the post-restructuring cost decline and the beginning of a new investment cycle.
surged to 50.4% from 43.4%, primarily due to $23.2M in IEEPA tariff refunds, with underlying improvement from price changes and lower write-downs.
Operating expenses net of restructuring rose 2.2% to $153.5M, as higher R&D investment and legal fees were largely offset by lower sales and marketing spend.
reached $29.9M compared to a $3.4M loss a year ago, benefiting from tariff refunds and a gain on sale of excess components.
was $144.2M for the nine months, supporting $95.3M in share repurchases; liquidity remains strong with $261M in cash and securities.
Quantitative and Qualitative Disclosures About Market Risk
Foreign-currency exposure from international sales and expenses remains unhedged; a 10% adverse rate move could lower pre-tax income by ~$5.0M (Q3) and ~$17.3M (YTD).
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International sales are mainly in foreign currencies (notably euro and British pound), so a stronger dollar reduces while a weaker dollar increases it.
Operating expenses incurred outside the U.S. in local currencies have the opposite effect: a stronger dollar lowers costs, a weaker dollar raises them.
The company has not entered into material foreign-exchange contracts or derivatives to hedge currency exposures.
Continued international expansion is expected to increase exposure to exchange-rate fluctuations, which could materially affect future results.
For Q3 FY2026, a hypothetical 10% adverse currency move would have reduced pre-tax income by approximately $5.0 million; for the nine-month period, approximately $17.3 million.
Realized foreign-currency impacts swung from a $0.6M gain in Q3 FY2025 to a $1.2M loss in Q3 FY2026, and the YTD loss narrowed from $5.2M to $2.1M.
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than the matters described in Note 7. Commitments and Contingencies of the notes to our condensed consolidated financial statements includ…
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From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than the matters described in Note 7. Commitments and Contingencies of the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we were not a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Our operations and financial results are subject to various risks and uncertainties, including the factors discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended September 27, 2025, which could adversely affect our business, reputation, f…
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Our operations and financial results are subject to various risks and uncertainties, including the factors discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended September 27, 2025, which could adversely affect our business, reputation, financial condition and operating results, and affect the trading price of our common stock. Except for the risk factors disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 28, 2026, which are hereby incorporated by reference into this Part II, Item 1A of this Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report.